3/19/2009 @ 7:05AM

A Rorschach Test for IBM and Sun

For years, Sun Microsystems was the pinnacle of Silicon Valley individualism: executives wore jeans and ponytails. Engineers played elaborate pranks on their bosses. The attitude was summed up by co-founder Scott McNealy’s first rule of management: “Kick butt and have fun.”

But the escalating talk of folding
Sun Microsystems
into a larger corporate behemoth is not merely a case of the recession making for strange bedfellows. In fact, Silicon Valley executives say that, over the past decade, Sun has evolved a more bureaucratic and corporate identity all its own that could ease the culture clash of merging it into a strait-laced outfit like
IBM
.

On Wednesday, reports that IBM might buy Sun for as much as $8 billion began circulating. (See “Why IBM Wants Sun Now.”) Silicon Valley insiders are still chattering about a short list of other potential bidders, including Cisco, Hewlett-Packard and even Fujitsu.

Sun is almost certain to wind up with a partner. But integrating it into another company, even IBM, might not be as tough as it seems. As executives from IBM and Sun weigh a possible tie-up, former employees of both companies say that their corporate cultures may be more aligned now than ever. Even as Sun has stiffened into a slow-moving, self-entangled behemoth over the past decade, IBM has gradually shifted into the nimble mode of a start-up.

“Sun is not the place it was 10 years ago,” says Peter Yared, a former Sun software executive who left the company in 2003 to found the start-up iWidgets. “It’s ground to a halt. And IBM is not as buttoned-up as it once was. In fact, the two companies have become remarkably compatible.”

Historically, Sun has been known for maintaining the culture of a typical freewheeling Silicon Valley start-up, even as it grew to thousands of employees. Former Chief Executive McNealy wore casual clothes to company meetings and was known for his unfiltered public comments. He once called Microsoft’s
Steve
Ballmer
Steve Ballmer
and
Bill
Gates
Bill Gates
“Beavis and Butthead.” His successor,
Jonathan
Schwartz
Jonathan Schwartz
, sports a ponytail and writes a widely read blog.

The company’s April Fools pranks are legendary: In 1986, employees reassembled a fully functional Volkswagen bug in the office of the then vice president of product development,
Eric
Schmidt
Eric Schmidt
, who would later become Google’s chief executive. In 1988, engineers removed the walls from McNealy’s office and made it into a one-hole golf course, complete with sand traps and a ball washer.

IBM, on the other hand, inherited a far more conservative tradition from its 19th-century founders. The company’s headquarters in Somers and Armonk, N.Y., are spare and utilitarian. Employees meeting with customers wear suits or skirts–jeans were long forbidden companywide.

That was the experience of ex-IBMer Sharon Thompson, who joined the company when the Silicon Valley database company she worked for, Informix, was acquired in 2000. It was not an easy transition. “They embraced our technology,” she says. “But the experience for us was different. Things moved slowly. There’s a chain of command. You’re given projects that don’t necessarily integrate with other programs. It was all pretty siloed.”

Mixing with long time IBMers was frustrating for the small West Coast company’s employees. “They truly had their IBM way of doing things,” Thompson says. “Being a thought leader or aggressive thinking outside the box was looked at oddly. It wasnt the IBM way.”

But that attitude slowly faded, says Paul Horn, IBM’s former head of research, who retired in late 2007. “We had a good mix of ideas from above and ideas bubbling up from below,” he remarks. “It’s all about the technology.”

IBM’s suit-and-tie rules have crumbled, too, starting with the lifting of the firm’s booze ban and dress code in the mid-1990s. From the time that Horn took charge of IBM Research in 1996, he adds, the group has always been “the beard and sandal set.”

“If I saw someone wearing a tie, it was because they were talking to a customer,” Horn notes. “The buttoned-down image of IBM is an anachronism.”

Meanwhile, Sun has shifted in the opposite direction, as the small company’s start-up ways have become mired in red tape, says Karl Jacob, who left Sun in 1994 and is now the CEO of cell phone accessory company Coveroo. Suits and ties, once worn only by sales teams, have become more common throughout the company, he observes.

Sun’s attitude toward innovation has changed, too. “When I was there, the culture was, ‘Don’t ask, just do it,’” he says. “Now the culture has changed from one of innovation at all costs to one of serving customer needs.”

He points to a redesign of the Java software platform that Sun developers undertook in the early 1990s for Internet pioneer, Netscape Communications. Sun created a browser-embedded version in just three months. Today, Java has millions of users, and every change to the software has far more impact, he says. “As the company has grown, the culture has been less about breakthroughs and more about not breaking things.”

That caution has meant that the company missed opportunities, according to former Sun exec Yared. “The engineers at IBM have more opportunity to be creative than those at Sun,” he says. “That’s why IBM has been blowing the socks off Sun in every category, from open-source software to server designs.”

Yared remembers a meeting with IBM executives, two years after he left Sun, that solidified the shift in his image of the computing giant. He was meeting with an IBM senior vice president at iWidget’s offices, but he arrived more than an hour late. When Yared came in, he found the IBMers, dressed in jeans and short sleeves, working on Apple laptops–each of them had switched after IBM sold its ThinkPad division in 2004.

He asked apologetically if they had at least managed to access the Internet during their wait. Sure, they said. Then the truth: one of the IBMers admitted that he had used a password-cracking program to break into iWidget’s wi-fi network. “That was when I knew that IBM had really changed.”